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The Chinese government has announced plans to cut US$55 billion in taxes this year in a move it hopes will boost consumer spending and small and medium-sized businesses.

As part of the cuts made the State Council, VAT will be reduced from four brackets to three, while people purchasing health insurance will be eligible for a deductible amount from their taxable income.

According to a report by CNBC, small and medium-sized businesses will also benefit from the cuts providing they have an annual income of 500,000 yuan (US$72,600) or less.

Speaking on the changes, Chinese Premier Li Keqiang stated that it was urgent for the government to adopt practical measures to increase corporate competitiveness, especially given the favourable tax cuts taken by many countries worldwide, Sina News reported.

China has a basic corporate tax rate of 25 percent, though that is often cut to 15 percent for businesses engaged in industries encouraged by the government, including new or high tech enterprises.

The government in China has applied favourable tax policies towards enterprises to lift market expectations in recent years.

At least US$14.5 billion in taxes and administrative fees were cut for small businesses in 2014 and 2015, while as much as US$82.8 billion in taxes were reduced for enterprises in 2016 thanks to VAT reform.